Wednesday, January 24, 2018

US Clarifies its Weak? Strong? Indifferent? US Dollar Policy

Various US officials attempted to make it crystal clear what the US position is on the US dollar. Below we have listed these efforts with links to various articles quoting US officials and even providing the President's position on this issue. Readers can take a look at these articles and decide how well they did clearing up any confusion that may exist.

-----------------------------------------------------------------------------------------------------------------------First up was Treasury Secretary Mnuchin who explained that a weaker US dollar is obviously good for US trade:

"Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin told reporters in Davos. The currency’s short term value is "not a concern of ours at all,” he said."Longer term, the strength of the dollar is a reflection of the strength of the U.S. economy and the fact that it is and will continue to be the primary currency in terms of the reserve currency," he said.----------------------------------------------------------------------------------------

Ross said in a "Squawk Box" interview from Davos that Mnuchin "was not advocating anything" in terms of the dollar. "I think what he exactly said is the dollar, just like the Treasury bond market, is a huge market, a very liquid market. It's not something we worry a lot about day by day," Ross argued."

The comments by Secretary Ross seem to say that the earlier comments by Secretary Mnuchin should not be interpreted to mean the US favors a weaker US dollar and that actually the US doesn't really pay much attention to the US dollar anyway. Despite that lack of concern, apparently The White House felt the need to further clarify things later in the day:

"The White House declined Wednesday to echo Treasury Secretary Steven Mnuchin's comment that a weaker dollar helps the United States.

Press secretary Sarah Huckabee Sanders told reporters that the dollar is "stable" and reflects a "strong" American economy. When pressed if President Donald Trump supports a stronger or weaker dollar, she did not specify.

"We believe in free-floating currency. The president has always believed in that," Sanders said."

My added comments: It appears that the US policy on the US dollar is that we either like a weaker dollar for trade, or we have not abandoned our "strong dollar" policy or that we don't actually pay attention to the US dollar or that we favor a free floating US dollar (which is of course what we have whether we favor it or not). Apparently, although the US dollar is not something we pay much attention to day to day, various US officials did spend most of this day talking about it and clarifying our position on it as it was falling sharply :-)

In a more serious vein, the chart below does show the US dollar index fell below the key 90 level. As we noted a few days ago, if the dollar does not bounce and hold here soon, there is not much support on the chart until it hits the 80 level. Gold responded by moving sharply higher.

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